Banking in Ethiopia
Thebanking sector ofEthiopiacomposed of the central bank, theNational Bank of Ethiopia(NBE) and the state ownedDevelopment Bank of Ethiopia(DBE), along with otherthirtyprivate banks.By 2020, the NBE planned to increase the minimum capital for banks to operate to 2 billion birr ($90 million) and instructed all commercial banks to increase their capital. Foreign banks did not allow to provide service in Ethiopia, instead use medium term as the government ofPrime MinisterAbiy Ahmedpursued wide economic reforms.[1]
Currently, Ethiopia has allowed foreign banks to provide liaison service for their country of origins;Chinese,German,Kenyan,TurkishandSouth Africanbanks opened their respective liaison banks inAddis Ababa.[1]
History
[edit]Ethiopian Empire
[edit]
Modern banking institution in Ethiopia was first introduced by the reign ofEmperorMenelik IIin 1905, where theBank of Abyssiniawas formed by concession between British representative of theNational Bank of Egypt.Since its formal establishment on 16 February 1906, it was under the management of National Bank of Egypt in accordance of concession agreed upon.[2][3]In 1963, a new banking law allows split into the National andCommercial Bank of Ethiopia.The law included other commercial banks to operate, including foreign banks operated 51% owned by Ethiopians. The biggest of these was the Addis Ababa Bank, owned by 40% owned by British owned Grindlays Bank, and had 26 branches by 1975. There were also two commercial banks: the Banco did Roma and the Banco did Napoli, which had eight branches and one branch respectively in 1975.[4]
Besides commercial banks, the government established a developmental bank which was owned 100% by the government. The Agricultural and Industrial Development Bank (AIDB) was formed in 1970, taking over two earlier development banks: theDevelopment Bank of Ethiopiaand the Ethiopian Investment Corporation which was established in 1963 as the Investment Bank of Ethiopia. AADB was a government owned bank providing both medium- and long term loans to agricultural and industrial sectors.[5][6]The Housing and Savings Bank was created in 1975 out of merger between two earlier housing finance institutions created in 1962 and 1965, one of them granted from the United States government.[7]
Derg
[edit]Under the military juntaDergleadership, the entire economy falls into the government control, declaring asocialistpolicy towards theeconomy of Ethiopia.[8][9]Private sectorcommercial banks were limited in existence; nationalized and concentrated into theCommercial Bank of Ethiopia(CBE).[10][11]
Banks with large customers shifted intopublic enterprises,and forced to lend to the government for developmental plans. Meanwhile, money supply grew in real terms and as a proportion of GDP. Based on central bank planning policy, the CBE willingly obliged to lend to public enterprises according to the government instruction. During theEthiopian Civil War,the profitable public enterprises reduced due to worsened foreign exchange shortages, and bankruptcy issues. They soon recovered as foreign exchange became more readily available. The lending to private sector, which was varying between 30% and 40% of loans and advance between 1981 and 1993, was equally straightforward, withoutforeign exchange;potential borrowers were not creditable and foreign exchange allocation is ideally profitable.[12]
| Year | Branches | Year | Branches | Year | Branches |
|---|---|---|---|---|---|
| 1975 | 2 | 1982 | 5 | 1989 | 3 |
| 1976 | 2 | 1983 | 4 | 1990 | 0 |
| 1977 | 5 | 1984 | 4 | 1991 | 0 |
| 1978 | 6 | 1985 | 3 | 1992 | 4 |
| 1979 | 6 | 1986 | 2 | 1993 | 1 |
| 1980 | 11 | 1987 | 6 | 1994 | 3 |
| 1981 | 3 | 1988 | 1 | Total | 71 |
FDRE
[edit]Following thedefeat of the Dergin 1991, the ruling coalitionEthiopian People's Revolutionary Democratic Front(EPRDF) reversed the Derg regime, proposing moreliberalpolicies. As such, the 1994 Monetary and Banking Proclamation established theNational Bank of Ethiopiaas the only judicial entity, independent from the government, under Proclamation No. 83/1994 and the Licensing and Supervision of Banking Business No. 84/1994 for investment in the banking sector.[2]
Shortly after proclamation,Awash International Bankwas established in 1994 by 486 shareholders and by 1998 its capital reached up to 50 millionETB.Dashen Bank was established on 20 September 1995 as a share company with capital 50 million ETB.Wegagen,Nib International Bank,andCooperative Bank of OromiaBank ensued.[2]
Traditional institutions
[edit]Well-knownsocial institutionsin Ethiopia includeEderandEqub.Eder is a long-term association of people that warrants supportive aid to a member community with insurance.[13]Equb is temporary and permanent,rotating savings and credit associationthat helps for funeral insurance where community members elect their leaders, contribute resources either in kind or incashand support the mourning member.[14]
References
[edit]- ^ab"Ethiopia - Banking Systems | Privacy Shield".www.privacyshield.gov.Retrieved2022-09-29.
- ^abc"History of Banking".National Bank.Retrieved2022-09-29.
- ^Schaefer, Charles (1992)."The Politics of Banking: The Bank of Abyssinia, 1905-1931".The International Journal of African Historical Studies.25(2): 361–389.doi:10.2307/219391.ISSN0361-7882.JSTOR219391.
- ^"Assessment Of Customer Satisfaction In Banking Services".29 September 2022.
- ^Brownbridge, Martin; Harvey (M.A.), Charles; Gockel, Augustine Fritz (1998).Banking in Africa: The Impact of Financial Sector Reform Since Independence.Africa World Press.ISBN978-0-86543-693-0.
- ^"View of Banking Sector Reform In Ethiopia".thejournalofbusiness.org.Retrieved2022-09-29.
- ^Brownbridge, Martin; Harvey (M.A.), Charles; Gockel, Augustine Fritz (1998).Banking in Africa: The Impact of Financial Sector Reform Since Independence.Africa World Press.ISBN978-0-86543-693-0.
- ^Markakis, John (May 1981)."The military state and Ethiopia's path to 'socialism'".Review of African Political Economy.8(21): 7–25.doi:10.1080/03056248108703464.ISSN0305-6244.
- ^"WIDER Research Paper 2006-112 The Structure"(PDF).29 September 2022.
- ^"and post-reform period with a special focus on bank"(PDF).EconStor.
- ^Addison, Tony; Geda, Alemayehu (2003-02-13),"Ethiopia's New Financial Sector and its Regulation",From Conflict to Recovery in Africa,Oxford University Press, pp. 171–186,doi:10.1093/acprof:oso/9780199261031.003.0011,ISBN978-0-19-926103-1,retrieved2022-09-29
- ^"banking reform in ethiopia - Institute of Development Studies"(PDF).29 September 2022.
- ^Seifu, Alemayehu (1968)."Eder in Abbis Ababa: a sociological study".Ethiopia Observer.12(1): 8–18.
- ^Emana, Bezabih (2009-02-01)."Working Paper No. 9 - Cooperatives: a path to economic and social empowerment in Ethiopia".www.ilo.org.Retrieved2022-09-30.